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Dangerous trends in government overreach are threatening taxpayers’ retirement accounts and state pensions…
by nick lolis
Earlier this week, South Carolina’s governor henry mcmaster Signed into law H 3690, requiring state pension fund officials to consider only financial factors when making investment decisions. On the face of it, this is perfectly reasonable and what you should expect from the people who manage the retirement benefits of many state employees.
However, this bill, both in its text and its intent, puts investment funds at the risk of pensioners and taxpayers by preventing fund managers from considering all relevant financial factors in their decision-making processes. It is the latest example of a dangerous trend toward politicized government overreach. .
State governments across the country have passed legislation aimed at restricting investment standards and restricting responsible investment practices. These policies target so-called “ESG” investing (an umbrella term for those related to environmental, social and governance issues within companies), but policymakers may actually misunderstand the concept. It is shown.
While critics misinterpret investor sustainability considerations as a strategy to impose ideology rather than achieving financial goals, it is clear that these considerations can have significant financial implications. . For example, if an investor is concerned that a company’s facilities are at significant risk of damage from extreme weather events and the company is not adequately prepared for that impact, the investor may As part of this, they should be free to consider that risk as they see fit. A larger investment strategy. As an example of the damage that extreme weather events can cause to buildings, infrastructure, and commercial property, take a look at the recent flooding in the Lowcountry. Many of the large international and domestic companies that invest and create jobs in South Carolina have ESG goals, and anti-ESG legislation sends a negative signal to companies looking to do business in South Carolina. There is a possibility.
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“Kansas and Indiana pension funds are expected to lose $3.6 billion and $6.7 billion…”
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Unfortunately, this misunderstanding of what actually constitutes prudent investment considerations has led to legislative mandates prohibiting the use of any ESG criteria, creating market distortions, reducing economic freedom, and has created an overly politicized approach to conflicting investment practices. -Market principles. It is not the government’s role to prohibit or mandate certain types of investment strategies and tell investors to ignore their risks and opportunities.
Free market principles drive innovation, increase productivity, and ensure economic efficiency. It is therefore not surprising that states that have passed legislation restricting investment standards are already experiencing some significant cost impacts.
Pension funds in Kansas and Indiana are expected to lose $3.6 billion and $6.7 billion, respectively, as a result of investment restriction policies. Elsewhere, cities and towns are facing steep interest rate increases due to bans on doing business with certain investment managers.
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In each case, these policies represent a problematic approach to capital markets that abandons both free market principles and the fiduciary duties of investment managers. In fact, many of these laws serve to undermine the well-intentioned goal of maximizing the value of retirement accounts and state pensions. Professional investors should be allowed to do what they do best: assess risks and opportunities without government overreach.
That’s why C3 Solutions is announcing a letter signed by nine other organizations, including the National Taxpayers Union, R Street, and the American Action Forum, to uphold our fiduciary responsibilities and advance economic growth, innovation, and environmental progress. They shared a set of principles to protect investment policy from politicization. .
The fact of the matter is that it is unfair and fiscally unwise for any state to put taxpayers and hardworking retirees at risk just to score political points in an election year. It is.
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About the author…
nick lolis I am Vice President of Public Policy at C3 Solutions. Loris researches and writes about a wide range of energy and climate policies, including natural resource extraction, energy subsidies, nuclear power, renewable electricity, and energy efficiency.
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